Apple Computer, Inc. designs, manufactures, and markets personal computers, software, networking solutions, and peripherals, including a line of portable digital music players. Apple's product family includes the Macintosh line of desktop and notebook computers, the iPod digital music player, the Mac OS X operating system, the iTunes Music Store, the Xserve G5 server, and Xserve RAID storage products. The company's products are sold online, through third-party wholesalers, and through its own chain of stores. Apple owns approximately 125 retail stores in the United States, as well as stores in Canada, Japan, and the United Kingdom.

ORIGINS

Apple was founded in April 1976 by Steve Wozniak, then 26 years old, and Steve Jobs, 21, both college dropouts. Their partnership began several years earlier when Wozniak, a talented, self-taught electronics engineer, began building boxes that allowed him to make long-distance phone calls for free. The pair sold several hundred such boxes.

In 1976 Wozniak was working on another box, the Apple I computer, without keyboard or power supply, for a computer hobbyist club. Jobs and Wozniak sold their most valuable possessions, a van and two calculators, raising $1,300 with which to start a company. A local retailer ordered 50 of the computers, which were built in Jobs's garage. They eventually sold 200 to computer hobbyists in the San Francisco Bay area for $666 each. Later that summer, Wozniak began work on the Apple II, designed to appeal to a greater market than computer hobbyists. Jobs hired local computer enthusiasts, many of them still in high school, to assemble circuit boards and design software. Early microcomputers had usually been housed in metal boxes. With the general consumer in mind, Jobs planned to house the Apple II in a more attractive modular beige plastic container.

Jobs wanted to create a large company and consulted with Mike Markkula, a retired electronics engineer who had managed marketing for Intel Corporation and Fairchild Semiconductor. Chairman Markkula bought one-third of the company for $250,000, helped Jobs with the business plan, and in 1977 hired Mike Scott as president. Wozniak worked for Apple full time in his engineering capacity.

Jobs recruited Regis McKenna, owner of one of the most successful advertising and public relations firms in Silicon Valley, to devise an advertising strategy for the company. McKenna designed the Apple logo and began advertising personal computers in consumer magazines. Apple's professional marketing team placed the Apple II in retail stores, and by June 1977, annual sales reached $1 million. It was the first microcomputer to use color graphics, with a television set as the screen. In addition, the Apple II expansion slot made it more versatile than competing computers.

The earliest Apple IIs read and stored information on cassette tapes, which were unreliable and slow. By 1978 Wozniak had invented the Apple Disk II, at the time the fastest and cheapest disk drive offered by any computer manufacturer. The Disk II made possible the development of software for the Apple II. The introduction of Apple II, with a user manual, at a consumer electronics show signaled that Apple was expanding beyond the hobbyist market to make its computers consumer items. By the end of 1978, Apple was one of the fastest-growing companies in the United States, with its products carried by over 100 dealers.

In 1979 Apple introduced the Apple II+ with far more memory than the Apple II and an easier startup system, and the Silentype, the company's first printer. VisiCalc, the first spreadsheet for microcomputers, was also released that year. Its popularity helped to sell many Apple IIs. By the end of the year sales were up 400 percent from 1978, at over 35,000 computers. Apple Fortran, introduced in March 1980, led to the further development of software, particularly technical and educational applications.

In December 1980, Apple went public. Its offering of 4.6 million shares at $22 each sold out within minutes. A second offering of 2.6 million shares quickly sold out in May 1981.

Meanwhile Apple was working on the Apple II's successor, which was intended to feature expanded memory and graphics capabilities and run the software already designed for the Apple II. The company, fearful that the Apple II would soon be outdated, put time pressures on the designers of the Apple III, despite the fact that sales of the Apple II more than doubled to 78,000 in 1980. The Apple III was well received when it was released in September 1980 at $3,495, and many predicted it would achieve its goal of breaking into the office market dominated by IBM. However, the Apple III was released without adequate testing, and many units proved to be defective. Production was halted and the problems were fixed, but the Apple III never sold as well as the Apple II. It was discontinued in April 1984.

The problems with the Apple III prompted Mike Scott to lay off employees in February 1981, a move with which Jobs disagreed. As a result, Mike Markkula became president and Jobs chairman. Scott was named vice-chairman shortly before leaving the firm.

Despite the problems with Apple III, the company forged ahead, tripling its 1981 research and development budget to $21 million, releasing 40 new software programs, opening European offices, and putting out its first hard disk. By January 1982, 650,000 Apple computers had been sold worldwide. In December 1982, Apple became the first personal computer company to reach $1 billion in annual sales.

The next year, Apple lost its position as chief supplier of personal computers in Europe to IBM, and tried to challenge IBM in the business market with the Lisa computer. Lisa introduced the mouse, a hand-controlled pointer, and displayed pictures on the computer screen that substituted for keyboard commands. These innovations came out of Jobs's determination to design an unintimidating computer that anyone could use.

COMPANY PERSPECTIVES

The company is committed to bringing the best personal computing and music experience to students, educators, creative professionals, businesses, government agencies, and consumers through its innovative hardware, software, peripherals, services, and Internet offerings. The company's business strategy leverages its unique ability, through the design and development of its own operating system, hardware, and many software applications and technologies, to bring to its customers new products and solutions with superior ease-of-use, seamless integration, and innovative industrial design.

Unfortunately, the Lisa did not sell as well as Apple had hoped. Apple was having difficulty designing the elaborate software to link together a number of Lisas and was finding it hard to break IBM's hold on the business market. Apple's earnings went down and its stock plummeted to $35, half of its sale price in 1982. Mike Markkula had viewed his presidency as a temporary position, and in April 1983, Jobs brought in John Sculley, formerly president of Pepsi-Cola, as the new president of Apple. Jobs felt the company needed Sculley's marketing expertise.

1984 DEBUT OF THE MACINTOSH

The production division for Lisa had been vying with Jobs's Macintosh division. The Macintosh personal computer offered Lisa's innovations at a fraction of the price. Jobs saw the Macintosh as the "people's computer," designed for people with little technical knowledge. With the failure of the Lisa, the Macintosh was seen as the future of the company. Launched with a television commercial in January 1984, the Macintosh was unveiled soon after, with a price tag of $2,495 and a new 3-inch disk drive that was faster than the 5 1/4-inch drives used in other machines, including the Apple II.

Apple sold 70,000 Macintosh computers in the first 100 days. In September 1984 a new Macintosh was released with more memory and two disk drives. Jobs was convinced that anyone who tried the Macintosh would buy it. A national advertisement offered people the chance to take a Macintosh home for 24 hours, and over 200,000 people did so. At the same time, Apple sold its two millionth Apple II. Over the next six months Apple released numerous products for the Macintosh, including a laser printer and a hard drive.

Despite these successes, Macintosh sales temporarily fell off after a promising start, and the company was troubled by internal problems. Infighting between divisions continued, and poor inventory tracking led to overproduction. Although originally a strong supporter of Sculley, Jobs eventually decided to oust the executive; Jobs, however, lost the ensuing showdown. Sculley reorganized Apple in June 1985 to end the infighting caused by the product-line divisions, and Jobs, along with several other Apple executives, left the company in September. They founded a new computer company, NeXT Incorporated, which would later emerge as a rival to Apple in the business computer market.

The Macintosh personal computer finally moved Apple into the business office market. Corporations saw its ease of use as a distinct advantage. It was far cheaper than the Lisa and had the necessary software to link office computers. In 1986 and 1987 Apple produced three new Macintosh personal computers with improved memory and power. By 1988, over one million Macintosh computers had been sold, with 70 percent of sales to corporations. Software was created that allowed the Macintosh to be connected to IBM-based systems. Apple grew rapidly; income for 1988 topped $400 million on sales of $4.07 billion, up from income of $217 million on sales of $1.9 billion in 1986. Apple had 5,500 employees in 1986 and over 14,600 by the early 1990s.

In 1988, Apple management had expected a worldwide shortage of memory chips to worsen. They bought millions when prices were high, only to have the shortage end and prices fall soon after. Apple ordered sharp price increases for the Macintosh line just before the Christmas buying season, and consumers bought the less expensive Apple line or other brands. In early 1989, Apple released significantly enhanced versions of the two upper-end Macintosh computers, the SE and the Macintosh II, primarily to compete for the office market. At the same time IBM marketed a new operating system that mimicked the Macintosh's ease of use. In May 1989 Apple announced plans for its new operating system, System 7, which would be available to users the next year and allow Macintoshes to run tasks on more than one program simultaneously.

KEY DATES

Apple becomes the first personal computer company to reach $1 billion in annual sales.

1985:

John Sculley assumes the helm after a management shakeup that causes the departure of Jobs and several other Apple executives.

1991:

PowerBook line of notebook computers is released.

1994:

Power Macintosh line is released.

1996:

Acquisition of NeXT brings Steve Jobs back to Apple as a special advisor.

1997:

Steve Jobs is named interim chief executive officer.

1998:

The all-in-one iMac is released.

2000:

Jobs, firmly in command as CEO, oversees a leaner, more tightly focused Apple.

2001:

The iPod is released; Apple opens its first retail store in Virginia.

2003:

Apple opens its first store in Japan.

2005:

The release of a video iPod, the fifth generation of the device, pushes total iPod unit sales to 30 million.

Apple was reorganized in August 1988 into four operating divisions: Apple USA, Apple Europe, Apple Pacific, and Apple Products. Dissatisfied with the changes, many longtime Apple executives left. In July 1990, Robert Puette, former head of Hewlett-Packard's personal computer business, became head of the Apple USA division. Sculley saw the reorganization as an at-tempt to create fewer layers of management within Apple, thus encouraging innovation among staff. Analysts credit Sculley with expanding Apple from a consumer and education computer company to a business computer company, one of the biggest and fastest-growing corporations in the United States.

Competition in the industry of information technology involved Apple in a number of lawsuits. In December 1989 for instance, the Xerox Corporation, in a $150 million lawsuit, charged Apple with unlawfully using Xerox technology for the Macintosh software. Apple did not deny borrowing from Xerox technology but explained that the company had spent millions to refine that technology and had used other sources as well. In 1990 the court found in favor of Apple in the Xerox case. Earlier, in March 1988, Apple had brought suits against Microsoft and Hewlett-Packard, charging copyright infringement. Four years later, in the spring of 1992, Apple's case was dealt a severe blow in a surprise ruling: copyright protection cannot be based on "look and feel" (appearance) alone; rather, "specific" features of an original program must be detailed by developers for protection.

MISMANAGEMENT, CRIPPLING AN INDUSTRY GIANT: 1990S

Apple entered the 1990s well aware that the conditions that made the company an industry giant in the previous decade had changed dramatically. Management recognized that for Apple to succeed in the future, corporate strategies would have to be reexamined. Apple had soared through the 1980s on the backs of its large, expensive computers, which earned the company a committed, yet relatively small following. Sculley and his team saw that competitors were relying increasingly on the user-friendly graphics that had become the Macintosh signature and recognized that Apple needed to introduce smaller, cheaper models, such as the Classic and LC, which were instant hits. At a time when the industry was seeing slow unit sales, the numbers at Apple were skyrocketing. In 1990, desktop Macs accounted for 11 percent of the PCs sold through U.S. computer dealers. In mid-1992, the figure was 19 percent.

But these modestly priced models had a considerably smaller profit margin than their larger cousins. So even if sales took off, as they did, profits were threatened. In a severe austerity move, Apple laid off nearly 10 percent of its workforce, consolidated facilities, moved production plants to areas where it was cheaper to operate, and drastically altered its corporate organizational chart. The bill for such forward-looking surgery was great, however, and in 1991 profits were off 35 percent. But analysts said that such pitfalls were expected, indeed necessary, if the company intended to position itself as a leaner, better-conditioned fighter in the years ahead.

Looking ahead is what analysts say saved Apple from foundering. In 1992, after the core of the suit that Apple had brought against Microsoft and Hewlett-Packard was dismissed, industry observers pointed out that although the loss was a disappointment for Apple, the company wisely had not banked on a victory. They credited Apple's ambitious plans for the future with quickly turning the lawsuit into yesterday's news.

In addition to remaining faithful to its central business of computer making (the notebook PowerBook series, released in 1991, garnered a 21 percent market share in less than six months), Apple intended to ride a digital wave into the next century. The company geared itself to participate in a revolution in the consumer electronics industry, in which products that were limited by a slow, restrictive analog system would be replaced by faster, digital gadgets on the cutting edge of telecommunications technology. Apple also experimented with the interweaving of sound and visuals in the operations of its computers.

For Apple, the most pressing issue of the 1990s was not related to technology, but concerned capable and consistent management. The company endured tortuous failures throughout much of the decade, as one chief executive officer after another faltered miserably. Scully was forced out of his leadership position by Apple's board of directors in 1993. His replacement, Michael Spindler, broke tradition by licensing Apple technology to outside firms, paving the way for ill-fated Apple clones that ultimately eroded Apple's profits. Spindler also oversaw the introduction of the Power Macintosh line in 1994, an episode in Apple's history that typified the perception that the company had the right products but not the right people to deliver the products to the market. Power Macintosh computers were highly sought after, but after overestimating demand for the earlier release of its PowerBook laptops, the company grossly underestimated demand for the Power Macintosh line. By 1995, Apple had $1 billion worth of unfilled orders, and investors took note of the embarrassing miscue. In a two-day period, Apple's stock value plunged 15 percent.

After Spindler's much publicized mistake of 1995, Apple's directors were ready to hand the leadership reins to someone new. Gil Amelio, credited with spearheading the recovery of National Semiconductor, was named chief executive officer in February 1996, beginning another notorious era of leadership for the beleaguered Cupertino company. Amelio cut Apple's payroll by a third and slashed operating costs, but drew a hail of criticism for his compensation package and his inability to relate to Apple's unique corporate culture. Apple's financial losses, meanwhile, mounted, reaching $816 million in 1996 and a staggering $1 billion in 1997. The company's stock, which had traded at more than $70 per share in 1991, fell to $14 per share. Its market share, 16 percent in the late 1980s, stood at less than 4 percent. Fortune magazine offered its analysis, referring to Apple in its March 3, 1997 issue as "Silicon Valley's paragon of dysfunctional management."

Amelio was ousted from the company in July 1997, but before his departure a significant deal was concluded that brought Apple's savior to Cupertino. In December 1996, Apple paid $377 million for NeXT, a small, $50-million-in-sales company founded and led by Steve Jobs. Concurrent with the acquisition, Amelio hired Jobs as his special advisor, marking the return of Apple's visionary 12 years after he had left. In September 1997, two months after Amelio's exit, Apple's board of directors named Jobs interim chief executive officer. Apple's recovery occurred during the ensuing months.

Jobs assumed his responsibilities with the same passion and understanding that had made Apple one of the greatest success stories in business history. He immediately discontinued the licensing agreement that spawned Apple clones. He eliminated 15 of the company's 19 products, withdrawing Apple's involvement in making printers, scanners, portable digital assistants, and other peripherals. From 1997 forward, Apple would focus exclusively on desktop and portable Macintoshes for professional and consumer customers. Jobs closed plants, laid off thousands of workers, and sold stock to rival Microsoft Corporation, receiving a cash infusion of $150 million in exchange. Apple's organizational hierarchy underwent sweeping reorganization as well, but the most visible indication of Jobs's return was unveiled in August 1998. Distressed by his company's lack of popular computers that retailed for less than $2,000, Jobs tapped Apple's resources and, ten months after the project began, unveiled the massively successful iMAC, a sleek and colorful computer that embodied Apple's skill in design and functionality.

Because of Jobs's restorative efforts, Apple exited the 1990s as a pared-down version of its former self, but, importantly, a profitable company once again. Annual sales, which totaled $11.5 billion in 1995, stood at $5.9 billion in 1998, from which the company recorded a profit of $309 million. In 1999, sales grew a modest 3.2 percent, but the newfound health of the company was evident in a 94 percent gain in net income, as Apple's profits swelled to $601 million. Further, Apple's stock mustered a remarkable rebound, climbing 140 percent to $99 per share in 1999. By the decade's end, "interim" was dropped from Jobs's corporate title, signaling Jobs's return on a permanent basis and fueling optimism that Apple could look forward to a decade of vibrant and consistent growth.

2001: IPOD, CATALYST TO GROWTH

Apple's turnaround was confirmed in the first years of the 21st century, as the company strode toward its 30th anniversary exuding an unprecedented degree of strength. At the heart of the company's surging growth was a digital music player branded as iPod. Introduced in late 2001, the device featured five gigabytes (GB) of storage, enabling the user to store approximately 1,000 songs on a player that was smaller than a deck of playing cards. Retailing for $399, the iPod represented another example of Apple's skill in designing an elegant and functional product, a product that became one of the most sought after consumer electronics items during the first half of the decade. Succeeding generations of iPods hit the market and scored resounding success, driving the company's financial growth. A 10 GB model was introduced in mid-2002, followed by the iPod Mini, iPod Shuffle, and iPod Nano, together representing a massive new source of revenue for the company. The fifth generation of the iPod debuted in 2005, a device available in a 30 GB or 60 GB model that was capable of storing and playing video files. By the time the video iPod arrived in stores, Apple derived roughly 35 percent of its revenue from iPods. Between 2001 and 2005, thanks primarily to the popularity of iPods, the company's sales nearly tripled, increasing from $5.3 billion to $13.9 billion. Apple controlled more than 75 percent of the $2.5 billion digital audio player market in the United States.

As the company enjoyed escalating sales midway through the decade, it also celebrated the success of a new dimension to its business. In 2001, the company opened its first retail outlet, a 6,000-square-foot store located in Tysons Corner, Virginia, that became the first unit of a chain of Apple-owned stores. By 2005, the company operated nearly 125 stores in the United States and a handful of stores in Canada, Japan, and the United Kingdom. With an expanding retail arm devoted to highlighting an impressively popular selection of products, Apple approached its 30th anniversary in a stronger position than ever before in its history. In the years ahead, the company's well-established ability to develop singular products for the digital marketplace promised to deliver impressive growth and excite the interests of consumers worldwide.

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Apple Computer, Inc. is largely responsible for the enormous growth of the personal computer industry in the 20th century. The introduction of the Macintosh line of personal computers in 1984 established the company as an innovator in industrial design whose products became renowned for their intuitive ease of use. Though battered by bad decision-making during the 1990s, Apple continues to exude the same enviable characteristics in the 21st century that catapulted the company toward fame during the 1980s. The company designs, manufactures, and markets personal computers, software, and peripherals, concentrating on lower-cost, uniquely designed computers such as iMAC and Power Macintosh models.

Origins

Apple was founded in April 1976 by Steve Wozniak, then 26 years old, and Steve Jobs, 21, both college dropouts. Their partnership began several years earlier when Wozniak, a talented, self-taught electronics engineer, began building boxes that allowed him to make long-distance phone calls for free. The pair sold several hundred such boxes.

In 1976 Wozniak was working on another box—the Apple I computer, without keyboard or power supply—for a computer hobbyist club. Jobs and Wozniak sold their most valuable possessions, a van and two calculators, raising $1,300 with which to start a company. A local retailer ordered 50 of the computers, which were built in Jobs’s garage. They eventually sold 200 to computer hobbyists in the San Francisco Bay area for $666 each. Later that summer, Wozniak began work on the Apple II, designed to appeal to a greater market than computer hobbyists. Jobs hired local computer enthusiasts, many of them still in high school, to assemble circuit boards and design software. Early microcomputers had usually been housed in metal boxes. With the general consumer in mind, Jobs planned to house the Apple II in a more attractive modular beige plastic container.

Jobs wanted to create a large company and consulted with Mike Markkula, a retired electronics engineer who had man-aged marketing for Intel Corporation and Fairchild Semiconductor. Chairman Markkula bought one-third of the company for $250,000, helped Jobs with the business plan, and in 1977 hired Mike Scott as president. Wozniak worked for Apple full time in his engineering capacity.

Jobs recruited Regis McKenna, owner of one of the most successful advertising and public relations firms in Silicon Valley, to devise an advertising strategy for the company. McKenna designed the Apple logo and began advertising personal computers in consumer magazines. Apple’s professional marketing team placed the Apple II in retail stores, and by June 1977, annual sales reached $1 million. It was the first micro-computer to use color graphics, with a television set as the screen. In addition, the Apple II expansion slot made it more versatile than competing computers.

The earliest Apple Us read and stored information on cassette tapes, which were unreliable and slow. By 1978 Wozniak had invented the Apple Disk II, at the time the fastest and cheapest disk drive offered by any computer manufacturer. The Disk II made possible the development of software for the Apple II. The introduction of Apple II, with a user manual, at a consumer electronics show signaled that Apple was expanding beyond the hobbyist market to make its computers consumer items. By the end of 1978, Apple was one of the fastest-growing companies in the United States, with its products carried by over 100 dealers.

In 1979 Apple introduced the Apple II+ with far more memory than the Apple II and an easier startup system, and the Silentype, the company’s first printer. VisiCalc, the first spread-sheet for microcomputers, was also released that year. Its popularity helped to sell many Apple Us. By the end of the year sales were up 400 percent from 1978, at over 35,000 computers. Apple Fortran, introduced in March 1980, led to the further development of software, particularly technical and educational applications.

In December 1980, Apple went public. Its offering of 4.6 million shares at $22 each sold out within minutes. A second offering of 2.6 million shares quickly sold out in May 1981.

Meanwhile Apple was working on the Apple IPs successor, which was intended to feature expanded memory and graphics capabilities and run the software already designed for the Apple II. The company, fearful that the Apple II would soon be outdated, put time pressures on the designers of the Apple III, despite the fact that sales of the Apple II more than doubled to 78,000 in 1980. The Apple III was well received when it was released in September 1980 at $3,495, and many predicted it would achieve its goal of breaking into the office market dominated by IBM. However, the Apple III was released without adequate testing, and many units proved to be defective. Production was halted and the problems were fixed, but the Apple III never sold as well as the Apple II. It was discontinued in April 1984.

The problems with the Apple III prompted Mike Scott to lay off employees in February 1981, a move with which Jobs disagreed. As a result, Mike Markkula became president and Jobs chairman. Scott was named vice-chairman shortly before leaving the firm.

Despite the problems with Apple III, the company forged ahead, tripling its 1981 research and development budget to $21 million, releasing 40 new software programs, opening European offices, and putting out its first hard disk. By January 1982, 650,000 Apple computers had been sold worldwide. In December 1982, Apple became the first personal computer company to reach $1 billion in annual sales.

The next year, Apple lost its position as chief supplier of personal computers in Europe to IBM, and tried to challenge IBM in the business market with the Lisa computer. Lisa introduced the mouse, a hand-controlled pointer, and displayed pictures on the computer screen that substituted for keyboard commands. These innovations come out of Jobs’s determination to design an unintimidating computer that anyone could use.

Unfortunately, the Lisa did not sell as well as Apple had hoped. Apple was having difficulty designing the elaborate software to link together a number of Lisas and was finding it hard to break IBM’s hold on the business market. Apple’s earnings went down and its stock plummeted to $35, half of its sale price in 1982. Mike Markkula had viewed his presidency as a temporary position, and in April 1983, Jobs brought in John Sculley, formerly president of Pepsi-Cola, as the new president of Apple. Jobs felt the company needed Sculley’s marketing expertise.

1984 Debut of the Macintosh

The production division for Lisa had been vying with Jobs’s Macintosh division. The Macintosh personal computer offered Lisa’s innovations at a fraction of the price. Jobs saw the Macintosh as the “people’s computer”—designed for people with little technical knowledge. With the failure of the Lisa, the Macintosh was seen as the future of the company. Launched with a television commercial in January 1984, the Macintosh was unveiled soon after, with a price tag of $2,495 and a new 3½-inch disk drive that was faster than the 5¼-inch drives used in other machines, including the Apple II.

Apple sold 70,000 Macintosh computers in the first 100 days. In September 1984 a new Macintosh was released with more memory and two disk drives. Jobs was convinced that anyone who tried the Macintosh would buy it. A national advertisement offered people the chance to take a Macintosh home for 24 hours, and over 200,000 people did so. At the same time, Apple sold its two millionth Apple II. Over the next six months Apple released numerous products for the Macintosh, including a laser printer and a hard drive.

Despite these successes, Macintosh sales temporarily fell off after a promising start, and the company was troubled by internal problems. Infighting between divisions continued, and poor inventory tracking led to overproduction. Although Jobs had originally been a strong supporter of Sculley, Jobs eventually decided to oust Sculley; Jobs, however, lost the ensuing show-down. Sculley reorganized Apple in June 1985 to end the infighting caused by the product-line divisions, and Jobs, along with several other Apple executives, left the company in September. They founded a new computer company, NeXT Incorporated, which would later emerge as a rival to Apple in the business computer market.

The Macintosh personal computer finally moved Apple into the business office market. Corporations saw its ease of use as a distinct advantage. It was far cheaper than the Lisa and had the necessary software to link office computers. In 1986 and 1987 Apple produced three new Macintosh personal computers with improved memory and power. By 1988, over one million Macintosh computers had been sold, with 70 percent of sales to corporations. Software was created that allowed the Macintosh to be connected to IBM-based systems. Apple grew rapidly; income for 1988 topped $400 million on sales of $4.07 billion, up from income of $217 million on sales of $1.9 billion in 1986. Apple had 5,500 employees in 1986 and over 14,600 by the early 1990s.

Company Perspectives

Apple ignited the personal computer revolution in the 1970s with the Apple II and reinvented the personal computer in the 1980s with the Macintosh. Apple is committed to bringing the best personal computing experience to students, educators, creative professionals and consumers around the world through its innovative hardware, software and Internet offerings.

In 1988, Apple management had expected a worldwide shortage of memory chips to worsen. They bought millions when prices were high, only to have the shortage end and prices fall soon after. Apple ordered sharp price increases for the Macintosh line just before the Christmas buying season, and consumers bought the less expensive Apple line or other brands. In early 1989, Apple released significantly enhanced versions of the two upper-end Macintosh computers, the SE and the Macintosh II, primarily to compete for the office market. At the same time IBM marketed a new operating system that mimicked the Macintosh’s ease of use. In May 1989 Apple announced plans for its new operating system, System 7, which would be available to users the next year and allow Macintoshes to run tasks on more than one program simultaneously.

Apple was reorganized in August 1988 into four operating divisions: Apple USA, Apple Europe, Apple Pacific, and Apple Products. Dissatisfied with the changes, many longtime Apple executives left. In July 1990, Robert Puette, former head of Hewlett-Packard’s personal computer business, became head of the Apple USA division. Sculley saw the reorganization as an attempt to create fewer layers of management within Apple, thus encouraging innovation among staff. Analysts credit Sculley with expanding Apple from a consumer and education computer company to a business computer company, one of the biggest and fastest-growing corporations in the United States.

Competition in the industry of information technology involved Apple in a number of lawsuits. In December 1989 for instance, the Xerox Corporation, in a $150 million lawsuit, charged Apple with unlawfully using Xerox technology for the Macintosh software. Apple did not deny borrowing from Xerox technology but explained that the company had spent millions to refine that technology and had used other sources as well. In 1990 the court found in favor of Apple in the Xerox case. Earlier, in March 1988, Apple had brought suits against Micro-soft and Hewlett-Packard, charging copyright infringement. Four years later, in the spring of 1992, Apple’s case was dealt a severe blow in a surprise ruling: copyright protection cannot be based on “look and feel” (appearance) alone; rather, “specific” features of an original program must be detailed by developers for protection.

Mismanagement—Crippling an Industry Giant: 1990s

Apple entered the 1990s well aware that the conditions that made the company an industry giant in the previous decade had changed dramatically. Management recognized that for Apple to succeed in the future, corporate strategies would have to be reexamined.

Apple had soared through the 1980s on the backs of its large, expensive computers, which earned the company a committed, yet relatively small following. Sculley and his team saw that competitors were relying increasingly on the user-friendly graphics that had become the Macintosh signature and recognized that Apple needed to introduce smaller, cheaper models, such as the Classic and LC, which were instant hits. At a time when the industry was seeing slow unit sales, the numbers at Apple were skyrocketing. In 1990, desktop Macs accounted for 11 percent of the PCs sold through American computer dealers. In mid-1992, the figure was 19 percent.

But these modestly priced models had a considerably smaller profit margin than their larger cousins. So even if sales took off, as they did, profits were threatened. In a severe austerity move, Apple laid off nearly ten percent of its workforce, consolidated facilities, moved production plants to areas where it was cheaper to operate, and drastically altered its corporate organizational chart. The bill for such forward-looking surgery was great, however, and in 1991 profits were off 35 percent. But analysts said that such pitfalls were expected, indeed necessary, if the company intended to position itself as a leaner, better-conditioned fighter in the years ahead.

Looking ahead is what analysts say saved Apple from foundering. In 1992, after the core of the suit that Apple had brought against Microsoft and Hewlett-Packard was dismissed, industry observers pointed out that although the loss was a disappointment for Apple, the company wisely had not banked on a victory. They credited Apple’s ambitious plans for the future with quickly turning the lawsuit into yesterday’s news.

In addition to remaining faithful to its central business of computer making—the notebook PowerBook series, released in 1991, garnered a 21 percent market share in less than six months—Apple intended to ride a digital wave into the next century. The company geared itself to participate in a revolution in the consumer electronics industry, in which products that were limited by a slow, restrictive analog system would be replaced by faster, digital gadgets on the cutting edge of telecommunications technology. Apple also experimented with the interweaving of sound and visuals in the operations of its computers.

Key Dates

1976:

With $1,300, Steve Jobs and Steve Wozniak found Apple Computer, Inc.

1980:

Apple converts to public ownership.

1982:

Apple becomes the first personal computer company to reach $1 billion in annual sales.

1985:

John Sculley assumes the helm after a management shakeup that causes the departure of Jobs and several other Apple executives.

1991:

PowerBook line of notebook computers is released.

1994:

Power Macintosh line is released.

1996:

Acquisition of NeXT brings Steve Jobs back to Apple as a special advisor.

1997:

Steve Jobs is named interim chief executive officer.

1998:

The all-in-one iMac is released.

2000:

Jobs, now firmly in command as CEO, oversees a leaner, more tightly focused Apple.

For Apple, the most pressing issue of the 1990s was not related to technology, but concerned capable and consistent management. The company endured tortuous failures throughout much of the decade, as one chief executive officer after another faltered miserably. Scully was forced out of his leadership position by Apple’s board of directors in 1993. His replacement, Michael Spindler, broke tradition by licensing Apple technology to outside firms, paving the way for ill-fated Apple clones that ultimately eroded Apple’s profits. Spindler also oversaw the introduction of the Power Macintosh line in 1994, an episode in Apple’s history that typified the perception that the company had the right products but not the right people to deliver the products to the market. Power Macintosh computers were highly sought after, but after overestimating demand for the earlier release of its PowerBook laptops, the company grossly underestimated demand for the Power Macintosh line. By 1995, Apple had $1 billion worth of unfilled orders, and investors took note of the embarrassing miscue. In a two-day period, Apple’s stock value plunged 15 percent.

After Spindler’s much-publicized mistake of 1995, Apple’s directors were ready to hand the leadership reins to someone new. Gil Amelio, credited with spearheading the recovery of National Semiconductor, was named chief executive officer in February 1996, beginning another notorious era of leadership for the beleaguered Cupertino company. Amelio cut Apple’s payroll by a third and slashed operating costs, but drew a hail of criticism for his compensation package and his inability to relate to Apple’s unique corporate culture. Apple’s financial losses, meanwhile, mounted, reaching $816 million in 1996 and a staggering $1 billion in 1997. The company’ stock, which had traded at more than $70 per share in 1991, fell to $14 per share. Its market share, 16 percent in the late 1980s, stood at less than four percent. Fortune magazine offered its analysis, referring to Apple in its March 3, 1997 issue as “Silicon Valley’s paragon of dysfunctional management.”

Amelio was ousted from the company in July 1997, but before his departure a significant deal was concluded that brought Apple’s savior to Cupertino. In December 1996, Apple paid $377 million for NeXT, a small, $50-million-in-sales company founded and led by Steve Jobs. Concurrent with the acquisition, Amelio hired Jobs as his special advisor, marking the return of Apple’s visionary 12 years after he had left. In September 1997, two months after Amelio’s exit, Apple’s board of directors named Jobs interim chief executive officer. Apple’s recovery occurred during the ensuing months.

Jobs assumed his responsibilities with the same passion and understanding that had made Apple one of the greatest success stories in business history. He immediately discontinued the licensing agreement that spawned Apple clones. He eliminated 15 of the company’s 19 products, withdrawing Apple’s involvement in making printers, scanners, portable digital assistants, and other peripherals. From 1997 forward, Apple would focus exclusively on desktop and portable Macintoshes for professional and consumer customers. Jobs closed plants, laid off thousands of workers, and sold stock to rival Microsoft Corporation, receiving a cash infusion of $150 million in exchange. Apple’s organizational hierarchy underwent sweeping reorganization as well, but the most visible indication of Jobs’s return was unveiled in August 1998. Distressed by his company’s lack of popular computers that retailed for less than $2,000, Jobs tapped Apple’s resources and, ten months after the project began, unveiled the massively successful iMAC, a sleek and colorful computer that embodied Apple’s skill in design and functionality.

Because of Jobs’s restorative efforts, Apple exited the 1990s as a pared-down version of its former self, but, importantly, a profitable company once again. Annual sales, which totaled $11.5 billion in 1995, stood at $5.9 billion in 1998, from which the company recorded a profit of $309 million. In 1999, sales grew a modest 3.2 percent, but the newfound health of the company was evident in a 94 percent gain in net income, as Apple’s profits swelled to $601 million. Further, Apples’ stock mustered a remarkable rebound, climbing 140 percent to $99 per share in 1999. By the decade’s end, “interim” was dropped from Jobs’s corporate title, signaling Jobs’s return on a permanent basis and fueling optimism that Apple could look forward to a decade of vibrant and consistent growth.

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Apple Computer, Inc.

Apple Computer was started with almost no capital in a garage in 1976. Within ten years it was a leader in the personal computer industry with a reputation for innovation and risk-taking.

Apple was founded in April of 1976 by Steve Wozniak, then 26 years old, and Steve Jobs, 21, both college dropouts. Their partnership began several years earlier when Wozniak, a talented, self-taught electronics engineer, began building boxes that allowed him to make long-distance phone calls for free. The pair sold several hundred such boxes.

In 1976 Wozniak was working on another box—the Apple I computer, without keyboard or power supply—for a computer hobbyist club. Jobs and Wozniak sold their most valuable possessions, a van and two calculators, raising $1,300 with which to start a company. A local retailer ordered 50 of the computers, which were built in Jobs’s garage. They eventually sold 200 to computer hobbyists in the San Francisco Bay area for $666 each. Later that summer, Wozniak began work on the Apple II, designed to appeal to a greater market than computer hobbyists. Jobs hired local computer enthusiasts, many of them still in high school, to assemble circuit boards and design software. Early microcomputers had usually been housed in metal boxes. With the general consumer in mind, Jobs planned to house the Apple II in a more attractive modular beige plastic container.

Jobs wanted to create a large company and consulted with Mike Markkula, a retired electronics engineer who had managed marketing for Intel Corporation and Fairchild Semiconductor. Chairman Markkula bought one-third of the company for $250,000, helped Jobs with the business plan, and in 1977 hired Mike Scott as president. Wozniak worked for Apple full time in his engineering capacity.

Jobs recruited Regis McKenna, owner of one of the most successful advertising and public relations firms in Silicon Valley, to devise an advertising strategy for the company. McKenna designed the Apple logo and began advertising personal computers in consumer magazines. Apple’s professional marketing team placed the Apple II in retail stores, and by June of 1977, annual sales reached $1 million. It was the first microcomputer to use color graphics, with a television set as the screen. In addition, the Apple II expansion slot made it more versatile than competing computers.

The earliest Apple lls read and stored information on cassette tapes, which were unreliable and slow. By 1978 Wozniak had invented the Apple Disk II, at the time the fastest and cheapest disk drive offered by any computer manufacturer. The Disk II made possible the development of software for the Apple II. The introduction of Apple II, with a user manual, at a consumer electronics show signaled that Apple was expanding beyond the hobbyist market to make its computers consumer items. By the end of 1978, Apple was one of the fastest-growing companies in the United States, with its products carried by over 100 dealers.

In 1979 Apple introduced the Apple II + with far more memory than the Apple II and an easier startup system, and the Silentype, the company’s first printer. VisiCalc, the first spreadsheet for microcomputers, was also released that year. Its popularity sold many Apple IIs. By the end of the year sales were up 400 percent from 1978, at over 35,000 computers. Apple Fortran, introduced in March of 1980, led to the further development of software, particularly technical and educational applications.

In December of 1980, Apple went public. Its offering of 4.6 million shares at $22 each sold out within minutes. A second offering of 2.6 million shares quickly sold out in May of 1981.

Meanwhile Apple was working on the Apple II’s successor, which was intended to feature expanded memory and graphics capabilities and be able to run the software already designed for the Apple II. The company, fearful that the Apple II would soon be outdated, put time pressures on the designers of the Apple III, despite the fact that sales of the Apple II more than doubled to 78,000 in 1980. The Apple III was well received when it was released in September of 1980 at $3,495, and many predicted it would achieve its goal of breaking into the office market dominated by IBM. However, the Apple III was released without adequate testing, and many proved to be defective. Production was halted and the problems were fixed, but the Apple III never sold as well as the Apple II. It was discontinued in April of 1984.

The problems with the Apple III prompted Mike Scott to lay off employees in February of 1981, a move with which Jobs disagreed. As a result, Mike Markkula became president and Jobs chairman. Scott was named vice-chairman shortly before leaving the firm.

Despite the problems with Apple III, the company forged ahead, tripling its 1981 research and development budget to $21 million, releasing 40 new software programs, opening European offices, and putting out its first hard disk. By January of 1982, 650,000 Apple computers had been sold worldwide. In December of 1982, Apple became the first personal computer company to reach $1 billion in annual sales.

The next year, Apple lost its position as chief supplier of personal computers in Europe to IBM, and tried to challenge IBM in the business market with the Lisa computer. Lisa introduced the mouse, a hand-controlled pointer, and displayed pictures on the computer screen that substituted for keyboard commands. These innovations come out of Jobs’s determination to design an unintimidating computer that anyone could use.

Unfortunately, the Lisa did not sell as well as Apple had hoped. Apple was having difficulty designing the elaborate software to link together a number of Lisas and was finding it hard to break IBM’s hold on the business market. Apple’s earnings went down and its stock plummeted to $35, half of its sale price in 1982. Mike Markkula had viewed his presidency as a temporary position, and in April of 1983, Jobs brought in John Sculley, formerly president of Pepsi-Cola, as the new president of Apple. Jobs felt the company needed Sculley’s marketing expertise.

The production division for Lisa had been vying with Jobs’s Macintosh division. The Macintosh personal computer offered Lisa’s innovations at a fraction of the price. Jobs saw the Macintosh as the “people’s computer”—designed for people with little technical knowledge. With the failure of the Lisa, the Macintosh was seen as the future of the company. Launched with a television commercial in January of 1984, the Macintosh was unveiled soon after, with a price tag of $2,495 and a new 3 1/2-inch disk drive that was faster than the 5 1/4-inch drives used in other machines, including the Apple II.

Apple sold 70,000 Macintosh computers in the first 100 days. In September of 1984 a new Macintosh was released with more memory and two disk drives. Jobs was convinced that anyone who tried the Macintosh would buy it. A national advertisement offered people the chance to take a Macintosh home for 24 hours, and over 200,000 people did so. At the same time, Apple sold its two millionth Apple II. Over the next six months Apple released numerous products for the Macintosh, including a laser printer and a hard drive.

Despite these successes, Macintosh sales temporarily fell off after a promising start, and the company was troubled by internal problems. Infighting between divisions continued, and poor inventory tracking led to overproduction. Although Jobs had originally been a strong supporter of Sculley, Jobs eventually decided to oust Sculley; Jobs, however, lost the ensuing showdown. Sculley reorganized Apple in June of 1985 to end the infighting caused by the product-line divisions, and Jobs, along with several other Apple executives, left the company in September. They founded a new computer company, Next Incorporated, which would later emerge as a rival to Apple in the business computer market.

The Macintosh personal computer finally moved Apple into the business office market. Corporations saw its ease of use as a distinct advantage. It was far cheaper than the Lisa and had the necessary software to link office computers. In 1986 and 1987 Apple produced three new Macintosh personal computers with improved memory and power. Apple and the Microsoft Corporation produced sophisticated software. By 1988, over one million Macintosh computers had been sold, with 70 percent of sales to corporations. Software was created that allowed the Macintosh to be connected to IBM-based systems. Apple grew rapidly; income for 1988 topped $400 million on sales of $4.07 billion, up from income of $217 million on sales of $1.9 billion in 1986. Apple had 5,500 employees in 1986 and over 14,600 by the early 1990s.

In 1988, Apple management had expected a worldwide shortage of memory chips to worsen. They bought millions when prices were high, only to have the shortage end and prices fall soon after. Apple ordered sharp price increases for the Macintosh line just before the Christmas buying season, and consumers bought the less expensive Apple line or other brands. In early 1989, Apple released significantly enhanced versions of the two upper-end Macintosh computers, the SE and the Macintosh II, primarily to compete for the office market. At the same time IBM marketed a new operating system that mimicked the Macintosh’s ease of use. In May of 1989 Apple announced plans for its new operating system, System 7, which would be available to users the next year and allow Macintoshes to run tasks on more than one program simultaneously.

Apple was reorganized in August of 1988 into four operating divisions: Apple IIsA, Apple Europe, Apple Pacific, and Apple Products. Dissatisfied with the changes, many longtime Apple executives left. In July of 1990, Robert Puette, former head of Hewlett-Packard’s personal computer business, became head of the Apple IIsA division. Sculley saw the reorganization as an attempt to create fewer layers of management within Apple, thus encouraging innovation among staff. Analysts credit Sculley with expanding Apple from a consumer and education computer company to a business computer company, one of the biggest and fastest-growing corporations in the United States.

Competition in the industry of information technology has involved Apple in a number of lawsuits. In December of 1989 for instance, the Xerox Corporation, in a $150 million lawsuit, charged Apple with unlawfully using Xerox technology for the Macintosh software. Apple did not deny borrowing from Xerox technology but explained that the company had spent millions to refine that technology and had used other sources as well. In 1990 the court found in favor of Apple in the Xerox case. Earlier, in March of 1988, Apple had brought suits against Microsoft and Hewlett-Packard, charging copyright infringement. Four years later, in the spring of 1992, Apple’s case was dealt a severe blow in a surprise ruling: copyright protection cannot be based on “look and feel” (appearance) alone; rather, “specific” features of an original program must be detailed by developers for protection.

Apple entered the 1990s well aware that the conditions that made the company an industry giant in the previous decade had changed dramatically. Management recognized that for Apple to succeed in the future, corporate strategies would have to be reexamined.

Apple had soared through the eighties on the backs of its large, expensive computers, which earned the company a committed, yet relatively small following. Sculley and his team saw that competitors were relying increasingly on the user-friendly graphics that had become the Macintosh signature and recognized that Apple needed to introduce smaller, cheaper models, such as the Classic and LC, which were instant hits. At a time when the industry was seeing
slow unit sales, the numbers at Apple were skyrocketing. In 1990, desktop Macs accounted for 11 percent of the PCs sold through American computer dealers. In mid-1992, the figure was 19 percent.

But these modestly priced models had a considerably smaller profit margin than their larger cousins. So even if sales took off, as they did, profits were threatened. In a severe austerity move, Apple laid off nearly ten percent of its work force, consolidated facilities, moved production plants to areas where it was cheaper to operate, and drastically altered its corporate organizational chart. The bill for such forward-looking surgery was great, however, and in 1991 profits were off 35 percent. But analysts said that such pitfalls were expected, indeed necessary, if the company intended to position itself as a leaner, better-conditioned fighter in the years ahead.

Looking ahead is what analysts say has saved Apple from foundering. In 1992, after the core of the suit that Apple had brought against Microsoft and Hewlett-Packard was dismissed, industry observers pointed out that although the loss was a disappointment for Apple, the company wisely had not banked on a victory. They credited Apple’s ambitious plans for the future with quickly turning the lawsuit into yesterday’s news.

In addition to remaining faithful to its central business of computer making—the notebook PowerBook series, released in 1991, garnered a 21 percent market share in less than six months—Apple intends to ride a digital wave into the next century. The company is geared to participate in a revolution in the consumer electronics industry, in which products that are currently limited by a slow, restrictive analog system will be replaced by faster, digital gadgets that are on the cutting edge of telecommunications technology. Apple is also experimenting with the interweaving of sound and visuals in the operations of its computers.

In a startling break from the past, the once-secretive Apple has begun forging business relationships with its fiercest competitors. Convinced that it would be too financially risky for Apple alone to embark on a new wave of sophisticated software research, Sculley helped fashion a deal with IBM for the two industry stalwarts to take the plunge hand in hand. It remains to be seen whether these unprecedented alliances, as well as the forays into dazzling new technological arenas, will be as rewarding as the visionary revamping, which, in the early 1990s, saved Apple from stagnancy and potential decline.

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Apple Computer, Inc.

Apple Computer, Inc.

Apple Computer, Inc., considered by many to be the most influential computer company in the world, began its operations in a suburban California garage. In 1976, Steve Jobs and Steve Wozniak launched Apple with one product: a small, simple computer called the Apple I. At the time, almost no one had heard of a personal computer, one small enough and easy enough to be used in the home. Computers were mostly large and expensive, and owned only by corporations. Apple changed that, creating the home-computer industry and introducing many of the personal computer features still common today.

From a Club to a Company

Steve Wozniak and Steve Jobs met as teenagers through a mutual friend. They shared an interest in electronics, and by 1975, were involved with the Homebrew Computer Club, where they exchanged ideas with others interested in computers. The club was centered in what is now called Silicon Valley, a part of central California where electronics and aerospace firms
sprang up during the 1960s and 1970s. Leading companies in the region included Lockheed, Hewlett-Packard Company (see entry), and Intel. Jobs and Wozniak both worked briefly at HP; Wozniak sometimes took home parts from the company to build his own computer. He was inspired by the Altair, a computer that came as a kit to be assembled at home. Released in 1975, the Altair was targeted at people with technical skills and never succeeded in the marketplace.

By this time, more than a dozen companies were making microprocessors, the electronic "brains" of computers located on small pieces of silicon, called chips. Chip prices began to fall, making it easier for electronics hobbyists to design their own computers. Still, the chips and other parts were not cheap. When Wozniak began building his first computer, he kept it simple to keep the cost low. This simplicity also made the machine more reliable. In February 1976, Wozniak showed his computer to Jobs and other members of their computer club. Realizing that Wozniak had created something new and amazing, Jobs convinced his friend to go into business making and selling the computer. Wozniak later said, as quoted in Infinite Loop, by Michael Malone, "Steve was the one who thought we could make money … Steve was the hustler."

Jobs had just turned twenty-one when he and Wozniak launched the Apple Computer Company. They sold Jobs's used van and Wozniak's expensive HP calculator to raise money. Working out of the garage at Jobs's parents home in Los Altos, they built their first fifty machines for a local electronics store. The company priced the Apple I at $666.66.

The Apple II

During the rest of 1976, Wozniak and Jobs took steps to ensure Apple's success. On the business side, Jobs consulted
with Mike Markkula, a former marketing executive at Intel. Markkula helped plan the company's development and arranged for Apple to receive a $250,000 bank loan. Markkula also recruited Mike Scott, another electronics executive, to become the first president of Apple in 1977.

Wozniak soon produced the Apple II, an improved version of his first computer. The Apple II included a case, keyboard, and power supply. It also had a programming language called BASIC built into its memory, so the machine could start working as soon as it was turned on. The Apple II also displayed color images when hooked to a television (separate computer monitors came later). Wozniak designed the Apple II so owners could easily add new components inside the machine.

Timeline

1976:

Steve Jobs and Steve Wozniak form the Apple Computer Company and sell their first personal computers.

Apple introduced its new computer at a computer show in May 1977 and received hundreds of orders in just a
few days. Within a year, sales of the Apple II hit $1 million. Early in 1978, Apple added an optional floppy disc drive. A disc worked better than cassette tapes for storing information. The disc gave users an easy way to share data with each other, and programmers began writing new software on the discs.

Wozniak kept improving the Apple II, and sales continued to grow. The company targeted schools and professionals as well as homes. Another boost came from VisiCalc, a new software program that ran only on Apple computers. This program was a spreadsheet—it calculated relations between numbers, usually credits and debits of a company. VisiCalc made the personal computer more than a toy—it became a business tool.

The Road to Macintosh

In 1980, Apple released its third computer, at a price of $3,495. Although it had added features, including more memory and better graphics, the Apple III had technical problems and did not sell well. That year, however, Apple saw its fortunes rise when it went public by selling shares in the company on the New York Stock Exchange. The company sold more than four million shares in less than one hour and raised more than $80 million. Wozniak, Jobs, and other executives instantly became millionaires.

There are several stories about how Apple got its name. Some people claim Steve Jobs chose it to recall his days working as an apple picker. Others claim that he took the name from Apple Records, the company formed by the pop group the Beatles during the late 1960s. The Apple logo was developed in 1977. The missing bite from the apple suggests a "byte," a unit of measurement used in computing.

By 1983, Mike Markkula was president of Apple, Jobs was chairman, and Scott was vice chairman. Wozniak was still the main technical wizard in a company that now had more than twenty-five hundred employees. The personal computer industry, however, had changed dramatically in just six years. Apple now had to compete with one of the leading technology companies in the world, IBM, which had started selling personal computers in 1981.

IBM called its computer the PC, for "personal computer." Its basic operating software, or system, was built by the Microsoft Corporation (see entry), a company founded by Paul Allen and Bill Gates (see entry). This software was not compatible with Apple's operating system. Consumers could not use Microsoft-based software on an Apple; Apple users could not run their software on a PC. The PC also used a different processor than Apple's machines, one made by Intel. Apple built its computers around Motorola processors. Eventually, other companies sold computers similar to the IBM model, and the name "PC" was used for all the Microsoft-based machines.

Apple confronted the competition in 1983 by hiring a new president, John Sculley. Jobs hoped Sculley's marketing skills would boost sales. The company also released new machines, the Apple IIe and the Lisa. Selling at almost $10,000, Lisa had two new features: a mouse and a graphical user interface (GUI). The GUI used images to represent software programs. Instead of typing in commands to open a program, users moved the mouse to point at and click on an icon, or picture, that represented the program. These new features made the Lisa easier to use than any other personal computer. The new technology was too expensive for most consumers, however, and the Lisa was a failure.

Apple had more success with its next new machine, the Macintosh, or "Mac." It featured a mouse and GUI, like the Lisa, as well as a smaller disc drive that worked faster than the old floppy discs. The Macintosh also cost much less than the Lisa.

Apple sold versions of the II for two more years, but the Mac and its later models became the company's major product. The improved Macs ran faster and had more memory than the original, and Apple and other companies designed software that took advantage of the Mac's power and ease of use. By 1988, the company had sold more than one million Macs. While achieving that success, however, Jobs had difficult relations with the board of directors, and he was forced out of the company in 1985. Wozniak left the same year.

Ups and Downs

Under Sculley, Apple found a new market with the introduction of desktop publishing. New software made it easy
to use a Mac to design newsletters, magazines, and other printed materials. Macs became the preferred computers of artists, designers, and many writers. Apple also continued to release new products, such as laser printers and a portable (laptop) computer. In 1989, company sales were more than $5 billion. But during the next decade, even as Apple introduced new features to the Mac, it lost ground to PCs. Microsoft had created an operating system, called Windows, which imitated the GUI of the Mac. Consumers could buy PCs much cheaper than Macs, and often with faster processing speeds and more memory.

Although it faced stiff competition, Apple and the Mac developed a core of devoted customers. In 1994, on the tenth anniversary of the Mac, the vice president of a consulting firm told Computer Dealer News, "You talk to people who use Macs and it is astounding the level of personal commitment these people have to the way Apple does things." That loyalty helped Apple remain an important force in the personal computer industry, even at times when sales or profits fell.

During the 1990s, Apple made a number of changes among its top executives. Sculley was replaced by Michael Spindler in 1993, and Gilbert Amelio took over as CEO in 1996. During those years, Apple made news by striking a deal with IBM and Motorola to make a new class of processors. It also waged a long court battle with Microsoft, accusing the software company of stealing patented ideas to build the Windows operating system. Apple finally settled that lawsuit 1997, after it made even bigger news by bringing Steve Jobs back to the company.

The Return of Jobs

At the time, Apple was losing hundreds of millions of dollars, and Jobs promised many changes. He told Time in August
1997, "There were a lot of lousy deals that we're undoing." In one new deal, Jobs made an arrangement with Microsoft, promising to put certain Microsoft software on new Macs in return for a $150 million investment. Long-time Apple fans were appalled; to them, Microsoft chairman Bill Gates was the enemy in a "war" between Macs and PCs. Jobs told Time that people had to move beyond the idea "that for Apple to win, Microsoft has to lose."

Under Jobs, Apple regained some popularity in 1998 with its iMac—the "i" stood for Internet. The new computer featured a monitor and central processing unit (CPU) sharing a rounded plastic case that came in several colors. The colorful devices appealed to customers who wanted a stylish product as well as a good computer. The iMac gave Apple its first profitable year since 1995. Next came a laptop version, the iBook, which proved to be another success. Not all the new Apple products, however, were hits. The PowerMac G4 Cube, released in 2000, packed a lot of processing power into a gleaming cube. But with no monitor included and a high price, the Cube did not sell well.

The first television ad for the Macintosh aired during the 1984 Super Bowl. The ad showed workers dressed in gray in front of a large video screen, where their boss—or a political leader—looked down on them. A female runner then entered the scene. She was in full color, and she threw a sledgehammer at the screen, shattering it into many pieces. The message was that the Macintosh would give computer users new freedom and independence. In 1995, Advertising Age named the ad the best of the previous fifty years.

Entering the twenty-first century, Jobs saw that people were using personal computers in different ways. Through the Internet they could record music, and digital cameras let people take photos and record movies, then store them on a computer. In 2002, Apple released a new iMac that included software to manage the creation and storage of all kinds of digital content. Apple had already introduced the iPod, a small machine that records 100 hours of songs in the MP3 format. In November 2001, Jobs told Fortune, "This is the twenty-first-century Walkman."

Cite this article Pick a style below, and copy the text for your bibliography.

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Apple Computer, Inc.

Apple Computer company was started with almost no capital in a garage in 1976. Within ten years it was a leader in the personal computer industry with a reputation for innovation and risk-taking.

Apple was founded in April 1976 by Steve Wozniak, 26 years old, and Steve Jobs, 21, both college drop-outs. Their partnership began several years earlier when Wozniak, a talented, self-taught electronics engineer, began building boxes that allowed him to make long-distance phone calls free. The pair sold several hundred such boxes.

In 1976 Wozniak was working on another box, the Apple I computer, without keyboard or power supply, for a computer hobbyist club. Jobs and Wozniak sold their most valuable possessions, a van and two calculators, raising $1,300 with which to start a company. A local retailer ordered 50 of the computers, built in Jobs’s garage. They eventually sold 200 to computer hobbyists in the San Francisco Bay area, for $666 each. Later that summer, Wozniak began work on the Apple II, designed to appeal to a greater market than computer hobbyists. Jobs hired local computer enthusiasts, many of them still in high school, who assembled circuit boards or designed software.

Jobs wanted to create a large company and brought in Mike Markkula, a retired electronics engineer who had managed marketing for Intel Corporation and Fairchild Semiconductor. Chairman Markkula bought one-third of the company for $250,000, helped Jobs with the business plan, and in 1977 hired Mike Scott, as president. Wozniak worked for Apple full-time in his engineering capacity. Jobs recruited Regis McKenna, owner of one of the most successful advertising and public relations firms in Silicon Valley. McKenna designed the Apple logo and began advertising personal computers in consumer magazines. Early microcomputers usually had been housed in metal boxes. Jobs housed the Apple II in a more attractive modular beige plastic container. Apple’s professional marketing team placed the Apple II in retail stores, and by June 1977, annual sales reached $1 million. It was the first microcomputer to use color graphics, with a television set as the screen. The Apple II expansion slot made it more versatile than competing computers.

The earliest Apple IIs read and stored information on cassette tapes, which were unreliable and slow. By 1978 Wozniak had invented the Apple Disk II, at the time the fastest and cheapest disk drive offered by any computer manufacturer. The Disk II made possible the development of software for the Apple II. The introduction of Apple II, with a user manual, at a consumer electronics show signaled that Apple was expanding beyond the hobbyist market to make its computers consumer items. By the end of 1978, Apple was one of the fastest growing companies in the United States, with its products carried by over 300 dealers.

In 1979 Apple introduced the Apple II +, with far more memory than the Apple II and an easier startup system, and the Silentype, the company’s first printer. VisiCalc, the first spreadsheet for microcomputers, was also released that year. Its popularity sold many Apple IIs. By the end of the year sales were up 400% from 1978, at over 35,000 computers. Apple Fortran, introduced in March 1980, led to the further development of software, particularly technical and educational applications.

In December 1980, Apple went public. Its offering of 4.6 million shares at $22 each sold out within minutes. A second offering of 2.6 million shares quickly sold out in May 1981.

Meanwhile Apple was working on the Apple II’s successor. It was to have expanded memory and graphics capabilities, and be able to run the software already designed for the Apple II. The company, fearful that the Apple II would soon be outdated, put time pressures on the designers of the Apple III, despite the fact that sales of the Apple II more than doubled to 78,000 in 1980. The Apple III was well received when it was released in September 1980 at $3,495, and many predicted it would achieve its goal of breaking into the IBM-dominated office market. However, many Apple IIIs proved to be defective; Apple had released it without adequate testing. Production was halted and the problems were fixed, but the Apple III never sold as well as the Apple II. It was discontinued in April 1984.

The problems with the Apple III caused Mike Scott to reduce the number of employees in February 1981, a move with which Jobs disagreed. As a result, Mike Markkula became president and Jobs chairman. Scott was named vice chairman and soon left the firm.

Despite the Apple III, the company forged ahead, tripling its 1981 research-and-development budget to $21 million, releasing 40 new software programs, opening European offices, and putting out its first hard disc. By January 1982, 650,000 Apple computers had been sold worldwide. In December 1982, Apple became the first personal computer company to reach $1 billion in annual sales.

In 1983 Apple lost its position as chief supplier of personal computers in Europe to International Business Machines (IBM), and tried to challenge IBM in the business market with the Lisa computer. Lisa introduced the mouse, a hand-controlled pointer, and displayed pictures on the computer screen that substituted for keyboard commands. These
innovations come out of Job’s determination to design a non-intimidating computer that anyone could use.

Unfortunately, the Lisa did not sell as well as Apple had hoped. Apple was having difficultly designing the elaborate software to link together a number of Lisas, and was finding it hard to break IBM’s hold on the business market. Apple’s earnings went down and its stock plummeted to $35, half of its sale price a year earlier. Mike Markkula had viewed this presidency as a temporary position, and in April 1983, Jobs brought in John Sculley, formerly president of Pepsi-Cola, as the new president of Apple. Jobs felt the company needed Sculley’s marketing expertise.

The production division for Lisa had been vying with Jobs’s Macintosh division. Macintosh offered Lisa’s innovations at a fraction of the price. Jobs saw the Macintosh as the “people’s computer,” for people who did not understand computers. With the failure of the Lisa, the Macintosh was seen as the future of the company. It was launched with a television commercial in January 1984. The Macintosh itself was unveiled soon after, with a price tag of $2,495 and a new 3½- inch disc drive that was faster than the 5¼-inch drives used everywhere else, including the Apple II. Apple sold 70,000 Macintoshes in the first 100 days. In September a new Macintosh was released with more memory and two disc drives. Jobs was convinced that anyone who tried the Macintosh would buy it. A national advertisement offered people the chance to take a Macintosh home for 24 hours and over 200,000 people did so. At the same time Apple sold its two millionth Apple II. In the next six months Apple released numerous products for the Macintosh, including a laser printer and a hard drive.

Despite these successes, Macintosh sales temporarily fell off after its promising start. The company was troubled by internal problems. Infighting between divisions continued, and poor inventory-tracking led to over-production. Jobs and Scully had initially been inseparable, but Jobs decided to oust Sculley. Jobs lost the ensuing show-down. Sculley reorganized Apple along functional lines in June 1985 to end the infighting caused by the product-line divisions, and Jobs left Apple in September with several other Apple executives. They founded a new computer company, Next Incorporated, which would later emerge as a rival to Apple in the business computer market.

The Macintosh computer finally moved Apple into the business office. Corporations saw its ease of use as a distinct advantage. It was far cheaper than the Lisa, and had the necessary software to link office computers. In 1986 and 1987 Apple produced three new Macintoshes with improved memory and power. Apple and the Microsoft Corporation produced sophisticated software. By 1988, over one million Macintoshes had been sold, with 70% of sales to corporations. Software was created that allowed Macintoshes to be connected to IBM-based systems. Apple grew rapidly; income for 1988 topped $400 million on sales of $4.07 billion, up from income of $217 million on sales of $1.9 billion in 1986. Apple had 5,500 employees in 1986 and over 11,700 by the beginning of 1989.

In 1988, Apple management expected a worldwide shortage of memory chips to continue. They bought millions when prices were high, only to have the shortage end and prices fall soon after. Apple ordered sharp price increases for the Macintosh line just before the Christmas buying season, and consumers bought the less expensive Apple line or other brands. In early 1989, Apple released significantly enhanced versions of the two upper-end Macintoshes, the SE and the Macintosh II, primarily to compete for the office market. At the same time IBM marketed a new operating system that mimicked the Macintosh’s ease of use. In May 1989 Apple announced plans for its new operating system, System 7.0, which would allow Macintoshes to run tasks on more than one program simultaneously. System 7.0 was to be available to users in 1990.

Apple was reorganized in August 1988 into four operating divisions: Apple USA, Apple Europe, Apple Pacific, and Apple Products. Dissatisfied with the changes, many longtime Apple executives left. In July 1990, Robert Puette, former head of Hewlett-Packard’s personal computer business, became head of the Apple USA division. Sculley saw the reorganization as an attempt to create fewer layers of management between the bottom and top of Apple, thus encouraging innovation. Analysts credit Sculley with expanding Apple from a consumer and education computer company to a business computer company, one of the biggest and fastest-growing corporations in the United States.

Competition in the industry of information technology has involved Apple in a number of lawsuits. In December 1989, Xerox Corporation, in a $150 million lawsuit, charged Apple with unlawfully using Xerox technology for the Macintosh software. Apple did not deny borrowing from Xerox technology, but explained that the company had spent millions to refine that technology, and had used other sources as well. In 1990 the court found in favor of Apple in the Xerox case. In March 1988, Apple had brought suits against Microsoft and Hewlett-Packard, charging copyright infringement. These cases were still in process in 1991.

Principal Subsidiary

Claris Corporation

Further Reading

Frieberger, Paul, and Michael Swaine, Fire in the Valley, The Making of the Personal Computer, Berkeley, California, Osborne-McGraw-Hill, 1984; Hogan, Thom, “Apple: The First Ten Years,”A +: The #1 Apple II Magazine, September 1987; Rose, Frank, West of Eden, New York, Penguin Books, 1989.

—Scott Lewis

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